Review of Voluntary Bonding Scheme for Veterinarians - MPI
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Review of Voluntary Bonding Scheme for Veterinarians ISBN No: 978-1-99-001736-0 (online) February 2020
Disclaimer While every effort has been made to ensure the information in this publication is accurate, the Ministry for Primary Industries does not accept any responsibility or liability for error of fact, omission, interpretation or opinion that may be present, nor for the consequences of any decisions based on this information. This publication is also available on the Ministry for Primary Industries website at http://www.mpi.govt.nz/news-and-resources/publications/ © Crown Copyright - Ministry for Primary Industries
[CONFIDENTIALITY STATEMENT IF REQUIRED] Review of Voluntary Bonding Scheme for Veterinarians Peter MacIntyre 11 December 2019
Contents
Executive summary ...................................................................................................................................................................... 3
Review of Voluntary Bonding Scheme for Veterinarians .............................................................................................. 6
Aims and scope of this review ............................................................................................................................. 6
Method used .............................................................................................................................................................. 6
Objective of the VBS ................................................................................................................................................ 7
Features of the VBS .................................................................................................................................................. 9
Background: VBS origins, previous reviews, consultations and amendments ...............................11
Question One: Is the objective of addressing rural veterinary shortages still relevant and
appropriate? .............................................................................................................................................................16
Question Two: Is this objective being met effectively by the current scheme? .............................19
Question Three: Is the scheme meeting this objective in a financially responsible and
accountable way? ...................................................................................................................................................20
Question Four: What changes could be made to the scheme? ...........................................................38
Question Five: Learnings? ....................................................................................................................................52
Recommendations .................................................................................................................................................53
About Us ....................................................................................................................................................................58
Appendices
Appendix A: Immigration Long Term Skill Shortage List .....................................................................................56
Appendix B: MPI press statement .................................................................................................................................57
Appendix C: Primary list of documents reviewed ...................................................................................................58
Figures
Figure 1 : VBS Recipients Data ..............................................................................................................................................10
Figure 2 : Retention of NZ Vets in the veterinary profession....................................................................................18
Figure 3 : Economics of VBS (partial equilibrium approach) .....................................................................................21
Figure 4 : Economics of VBS allocation of benefits .......................................................................................................22
Figure 5 : Impacts of production animal diseases .........................................................................................................25
Figure 6 : If there were no VBS (the counterfactual) ....................................................................................................27
Figure 7 : Survey results to question about how many months in an average year practices would face
being understaffed, so that it reduced profitability, if the VBS scheme were not in place ..........................28
Figure 8 : Breakeven Analysis Input Data ..........................................................................................................................35
Figure 9 : Breakeven Analysis of VBS Benefits ................................................................................................................36
Figure 10 : Attracting graduate vets to eligible practices ..........................................................................................39
Figure 11 : Degree of effect of VBS on attracting graduate vets ............................................................................40
Figure 12 Retaining graduate vets in eligible practices ..............................................................................................41
Figure 13 Degree of effect of VBS in retaining graduate vets ..................................................................................42
Figure 14 : NZ trained vs International trained new registrants each year .........................................................43
www.thinkSapere.com Confidential iFigure 15 : Distribution of Men and Women in practising as veterinarians in New Zealand in 2018 ......49 ii Confidential www.thinkSapere.com
Executive summary
Aim of Review
As part of its responsibilities MPI regularly examines its portfolio of investment programmes. It
therefore decided to review the Voluntary Bonding Scheme (VBS) to ensure it was effectively meeting
both the scheme’s objectives, and the wider strategic objectives of MPI and the Government. In this
context this review seeks to address key questions about whether the VBS is still relevant and
appropriate in addressing rural veterinary staff shortages. It also investigates whether its objective is
being met effectively and in a financially responsible and accountable way and what changes, if any,
might be appropriate.
Voluntary Bonding Scheme (VBS) for Veterinarians
The VBS for veterinarians has been in operation since 2009. It is an incentive of $11,000 per annum.
up to a maximum of $55,000 in total, before tax which is paid directly to graduate vets to encourage
them to work in rural vet practices focused on servicing production animals. It aims to change the
willingness of graduate vets to work in these eligible practices. It is normally open to 30 veterinary
science graduates from Massey University per year who are New Zealand citizens or permanent
residents. Including the 2019 application round, there have been 318 VBS applicants approved in
total since the scheme’s inception. 31 per cent of these graduates have been paid their full $55,000 so
far while 43 per cent are still progressing through the scheme. 26 per cent withdrew before reaching
the end of the five year programme but only 5 percent did not get any payment as they did not
remain in the scheme serving production animals for at least 3 years.
Findings
To be effective, the VBS should have changed the willingness of graduate vets to work in eligible
production animal focused practices. These practices should, as a result of the VBS, have less gaps in
their staff line up than they otherwise would have had and be better able to service their farming
clients.
The limited available data, interviews and a survey of eligible vet practices supports that the VBS has
had a positive impact and has changed retention in eligible practices in particular. It is likely to have
had less impact on attracting graduate vets to such practices.
The VBS is likely to have had a number of benefits that are open to some quantitative estimation
including:
Production and welfare losses avoided
Prevention and production optimisation consultations undertaken
Recruitment costs avoided
Training costs avoided
Staff productivity benefits gained through avoiding higher staff turnover
It also is likely to have had a number that are less tangible, qualitative benefits such as:
Less burn out potential for existing vet staff including mental health
problems
Increased opportunity to fit in and get comfortable in a rural community
© 2019 Sapere Research Group More eyes and ears to detect biosecurity, animal welfare and food safety
threats
The benefits of the VBS that are open to some quantitative estimate suggest that it is likely to cover its
costs of circa $1.2 million per annum. This conclusion is strengthened if the qualitative benefits are
included.
Is the objective of addressing rural veterinary shortages still relevant and appropriate and being
met effectively? (Questions One & Two)
Unfortunately, there is a lack of suitable or reliable metrics for assessing the impact of the VBS on any
shortage of rural vets. This left interviews and surveys as the best option for exploring these
questions. The evidence from these showed that there is likely to be continued difficulties employing
rural vets which would be made more acute if the VBS scheme were not in place and that those
difficulties are likely to be more acute in more isolated areas.
Does the VBS’s net economic benefits outweigh its costs? (Question Three)
Interviews and the survey of VBS eligible practices were also used to explore and estimate this.
Several possible implications of not having the VBS were identified including:
Staff shortages of graduates
Burn out of existing staff
Less focus on prevention and production optimisation
Less time for managing the practice and higher recruitment costs
Poor retention resulting in more time training and poorer returns on
investment in training new staff
Less resources for control of biosecurity, animal welfare & food safety risks.
Using data on vet wages, practice mark ups and recruitment and training costs it was possible to make
assumptions to explore what level of effects would need to exist for the benefits of the VBS to
outweigh its costs.
This exploratory breakeven analysis showed that the VBS was likely to cover its costs even if quite low
levels of these listed implications were to result from not having a VBS. All of them would only need
to affect around 10 per cent of eligible practices each year, at the amounts assumed, for the VBS to
cover its costs. The survey of eligible practices suggested these effects would be much higher than 10
per cent without the VBS.
Possible Changes to the VBS? (Question 4 continued)
Improvements could be possible for the VBS. These include better targeting of the VBS, possibly by
using an isolation index to define eligible practices similar to the approach taken by the education
VBS. It may also be possible to use a two-tier system that targets the more isolated rural practices as
priorities for the VBS incentive. Such changes could be combined with changes to who is targeted by
the VBS.
It might also be worth considering allowing VBS applications from people who are returning from
overseas after a few years away. This could increase the pool of eligible vets who could both provide
4 Confidential www.thinkSapere.comEXECUTIVE SUMMARY vet services in eligible practices and help pay back their student loans. This could be achieved by allowing a longer window of time in which graduates can apply. As increasing numbers of women graduate as vets it may be worthwhile considering a more lenient definition of full-time work to assist them post maternity leave. Some deferral of VBS payments to match the difference between full time and part time hours worked might be one way of fairly achieving this. The fairness of the balloting process that occurs when the 30 annual VBS places are oversubscribed was challenged by many of those surveyed and interviewed. This could be addressed by approaching the forecasting and budgeting of VBS costs more flexibly to allow some increases in numbers from time to time, as has occurred in the 2019 VBS selection process. Alternatively, a merits-based system which takes graduates in descending order of grades from Massey in their final year or some similar approach could be considered. The question of the tax status of the VBS is another feature of the scheme that engendered a lot of feedback. This feedback could be addressed, and administrative costs from queries potentially reduced, if the transparency of the tax status of the VBS were improved. Changing the way the VBS quantum is described from a pre-tax, to a post-tax, basis could help achieve this. Is the shortage of rural vets sufficient to justify retaining the VBS and does it continue to align with Government policy objectives, MPI strategy, and the national interest? (Question Four) The analysis of net benefits shows that the VBS appears to be meeting its narrow objectives of cost effectively encouraging vets to work in rural practices and making a significant contribution to repayment of student loans. Adding in the qualitative benefits strengthens the case that the VBS continues to be aligned with Government policy objectives, MPI strategy and the national interest. Lessons from the VBS programme that could be applied to MPI’s wider portfolio of investments? (Question Five) The lack of good data makes it difficult to monitor the performance of the VBS. Having data from well conducted surveys undertaken at the outset of a programme and then done periodically as the programme progresses are of significant value and could be considered in future programmes. The other VBS programmes are much larger than the MPI VBS. For example, the health VBS with an annual budget of circa $7 million. It is possible that the MPI VBS could find helpful synergies or more cost-effective processes by regular catch ups and comparisons with the other two VBSs. www.thinkSapere.com Confidential 5
Review of Voluntary Bonding Scheme for
Veterinarians
Aims and scope of this review
1. As part of its stewardship responsibilities MPI regularly examines its portfolio of investment
programmes. Some preliminary analysis indicated that the VBS scheme would benefit from
closer review to ensure it was effectively meeting both the scheme’s objectives, and the wider
strategic objectives of MPI and the Government. In this context this review seeks to address the
following key questions:
Is the scheme still relevant and appropriate in addressing rural veterinary
staff shortages?
Is the objective being met effectively by the current scheme?
Is the scheme meeting this objective in a way that is financially responsible
and accountable? and
Where these conditions are currently not, or are only partially being met,
what changes could be made?
2. This review does not consider whether veterinary para-professionals might be included in the
scheme.
Information provided to the reviewer
3. The reviewer appraised a wide range of information about the VBS provided by Investment
Programmes, MPI. These are listed in Appendix C: This list included the preliminary evaluation
report conducted by IPD of MPI and copies of resources used in this investigation and historical
MPI documents relating to the scheme, including cabinet papers. Further documents including
letters from practice managers referring to staff shortages, and some job advertisements were
also provided by MPI.
Method used
Inception Meeting Tuesday 20th of August
4. An inception meeting was held with MPI on Tuesday the 20th of August. The agenda was to
discuss and confirm the review objectives, method and approach; timeframes, list of
stakeholders and the terms of reference interview questions.
Stakeholder interviews
5. Questions were framed using those set out in the terms of reference as our focus. Semi-
structured interviews with key stakeholders and other relevant parties were undertaken as listed
on page 3 of the terms of reference and set out in more detail in the document titled “List of
Stakeholders for VBS Review.”
6 Confidential www.thinkSapere.comREVIEW OF VOLUNTARY BONDING SCHEME FOR VETERINARIANS
Listed interviewees
6. The ten key people on page 1 of the “List of Stakeholders for VBS Review” were interviewed
with one exception1. Some of those interviewed suggested following up with other
stakeholders so the number of interviews was extended to include a representative of the Allied
Veterinary Professional Regulatory Council, another Vet Council of NZ representative and a vet
from the Rangitikei who had recently written a report on retention of rural vets as part of the
Kellogg scholarship programme.
7. MPI sent out an email to VBS graduates and VBS eligible practices informing them of this
review of the VBS. As a result of this email 19 vets proactively contacted Sapere. Seventeen of
these people were interviewed, mostly by phone but a few in person 2. 173 veterinary practices
were also surveyed on their views about the performance of the VBS. These were drawn from
email addresses provided by MPI that were not repeated on a fuller list of 215 email addresses.
Forty vet practice representatives responded to the survey 3.
8. In all interviews a wider set of views were explored.
Synthesis and analysis
9. Notes were taken of the stakeholder interviews and cross referenced with the evidence from the
document review, the MPI survey of VBS recipients and the survey of VBS eligible vet practices
to formulate overall findings. Conclusions were developed against each of the review questions
and used to validate findings.
Objective of the VBS
10. A key question to consider in investigating the performance of the VBS is, “what is its
objective?”
11. In 2008 the Government committed to establishing a voluntary bonding scheme (VBS) to
provide financial incentives to address specific workforce shortages in the teaching, medical and
veterinary professions4. In January 2009 a briefing for the then Minister of Agriculture, Forestry
and Biosecurity explained the aim of the VBS for graduating veterinarians as:
“to support retention of veterinarians in understaffed, rural
areas, to assist New Zealand to retain world class standards
in biosecurity, animal welfare and food safety.”5
1 One person suggested that she was a bit out of date about the scheme, so we didn’t interview her.
2 Messages were left for the remaining two on at least two occasions. They two may have participated in the
survey of vet practices.
3 The response rate is challenging to calculate because the same people were emailed twice in some cases as they
had different email addresses and a number of those emailed would have responded on behalf of the vet
practice. It is therefore likely that the response rate was somewhere between 23 per cent and 30 per cent.
4 Source: file Cab paper CBC (08) 544.pdf, 12 December 2008, Page 29
5 Source: file “Briefing B08-381.pdf”, 21 January 2009, Page 6
www.thinkSapere.com Confidential 712. It also stated that:
“Recruitment and retention difficulties are characterised by
difficulty filling vacancies and retaining staff within an
employment organisation. For veterinary practices in areas
of greatest need this may be due to remoteness, practice
size and other factors. 6
13. The VBS for graduating veterinarians began in February 20097. The MPI website describes the
purpose of the VBS as:
“to help ease the shortage of rural veterinarians working with production
animals, the Ministry for Primary Industries (MPI) set up the Voluntary Bonding
Scheme for Veterinarians. The scheme aims to attract and retain graduate vets
into rural practice. It provides a payment to recently graduated vets who work
in an eligible practice with a primary focus in production animals.”
14. The terms and conditions for the VBS for the 2019 application round 8 contained a statement
under the heading ‘Background’ that included the aim stated in paragraph 10 above as well as
the following:
“The Scheme also aims to make a significant contribution to repayment of
student loans for those Graduates who have them but will be available to those
without loans or those who have already paid off their loan.”
15. Drawing on the statements above about the scheme’s goals, it could be summarised as: “to
support retention of veterinarians in understaffed, rural areas, to assist New Zealand to retain
world class standards in biosecurity, animal welfare and food safety.” and “For veterinary practices
in areas of greatest need this may be due to remoteness, practice size and other factors.” The
problem is defined as a lack of vets in rural areas due to remoteness etc. The action is to use
the VBS to attract and retain vets, graduate vets specifically, to these areas. The wider policy
objective is explicitly to retain world class standards in biosecurity, animal welfare and food
safety. In addition, it is to make a significant contribution to repayment of student loans for
graduates who have them but is still paid to those without them. Commercial gains by
practices or farmers are not explicitly cited. The focus on production animals rather than any
other animals is clear.
6 Source: file “Briefing B08-381.pdf”, 21 January 2009, Page 7
7 See file “Research Doc B15-323_Meeting with NZ Veterinary Association.docx”, Page 9
8 Voluntary Bonding Scheme for Veterinarians, Terms and Conditions, Page 1, see
https://www.agriculture.govt.nz/dmsdocument/36762-2019-vet-bonding-scheme-terms-and-conditions-pdf
8 Confidential www.thinkSapere.comREVIEW OF VOLUNTARY BONDING SCHEME FOR VETERINARIANS
Features of the VBS
16. Currently the VBS is normally open to 30 veterinary science graduates from Massey University
per year who are New Zealand citizens or permanent residents, who have been offered work9 at
an eligible practice and who graduated in the 12 months prior to submitting their applications.
17. Eligible practices are required to have:
a production animal10 focus (greater than 60 percent of the turnover
generated by the Practice is generated from production animals)11; and
good employment practices, including having systems in place to support
a graduate’s personal career development12
18. The programme runs for 5 years unless a participant leaves it earlier. Participants receive a first
payment of $33,000 after 3 years, and further payments of $11,000 after the fourth and fifth
years in the scheme.
19. Other key features of the VBS are:
The annual amount of the payment incentive of $11,000 is taxable with the
balance being credited to the student loan, if the student has a loan, or
directly to the student.
It has a receipt date for first applications for each round (for the 2019
round applications opened on 12 August 2019 and closed at 3pm on 26
August 2019)
It has a list of eligibility criteria for the graduates and the veterinary
practices.
It has a guideline for processing all applications up until the cap of 30
graduates is reached.
It also has a guideline for handling applications received after the cap is
reached. This involves holding another ballot of remaining applicants to
make a secondary list of candidates. If someone leaves the scheme in their
first 2 years or there aren't enough applicants in the next application round
the first eligible person on the secondary list will be asked to join the
scheme.
9 Full-time means employment for at least 35 hours per week, see VBS Ts & Cs, Page 1 Definition of Terms.
10 Production Animal means an animal that is farmed for food or fibre, including but not limited to, cattle, sheep,
goats, poultry, deer and pigs, and excluding horses. See VBS Ts & Cs, Page 1 Definition of Terms.
11 Overall Production Animal Focus means that servicing production animals is a core focus of the practice either
because it is the only practice servicing production animals and/or working dogs in the area or because more
than 60 percent of the turnover generated by the practice is from servicing production animals and/or working
dogs.
12 Good employer practices mean that the practice follows generally accepted guidelines for being a good
employer, such as those published by the Department of Labour. This will include having a system in place
whether formal or informal to ensure that there is support for the graduate in their transition from study to work.
see VBS Ts & Cs, Page 1 Definition of Terms
www.thinkSapere.com Confidential 9 It has guidelines for assessing whether taking parental leave or transferring
practices allows a recipient to remain eligible for the scheme.
International students are excluded. 13
20. There is an appropriation in place of $1.65 million per year under Vote: Primary Industries to
fund the VBS. The initial funding for the VBS was through fiscally neutral transfers across Vote
Agriculture and Forestry, and Vote Biosecurity. 14
VBS Participants
21. Figure 1 below sets out the numbers of VBS recipients in each year’s application round since the
VBS began in 2009. It shows that up to and including this year’s application round there have
been 318 applicants approved in total. Of these 31 per cent, or 98 graduates have so far been
paid their full $55,000 while 43 per cent are still progressing through the scheme. 26 per cent
or 83 applicants have withdrawn before reaching the end of the five year programme.
Figure 1 : VBS Recipients Data
Total Withdrawn in Withdrawn Withdrawn
Total Total
Year Finished VBS In Progress first 3 years after 3 years after 4 years
Approved Withdrawn
Paid $55K Not Paid VBS$ Paid $33K Paid $44K
2009 23 16 7 2 2 3
2010 22 15 7 4 3
2011 31 20 11 9 2
2012 30 17 13 2 6 5
2013 30 17 13 4 7 2
2014 30 13 1 16 2 11 3
2015 30 17 13 4 8 1
2016 30 27 3 2 1
2017 30 30
2018 30 30
2019 32 32
Totals 318 98 137 83 16 48 19
100% 31% 43% 26% 5% 15% 6%
Per cent of Withdrawals Only 100% 19% 58% 23%
22. The data shows that there tends to be very few withdrawals from the VBS in years 1 to 3.
However, withdrawals lift in the years 4 and 5. Of those that withdrew, only 20 per cent or 16
applicants left before reaching three years in the scheme and therefore did not receive any VBS
funding; 58 per cent, or 48 applicants, reached three years on the programme and a further 23
per cent or 19 reached four years.
13 Source: file “Research Doc Letter re 2009 VBS Review.docx”, Page 5
14 See file “Cab paper SOC (09) 6.pdf”, 16 February 2009, Page 2
10 Confidential www.thinkSapere.comREVIEW OF VOLUNTARY BONDING SCHEME FOR VETERINARIANS
23. Earlier research15 identified that the recurring reasons for withdrawal have included:
Moving overseas with no intention to return within 12 months.
Moving to a new role where either role or practice is not eligible (e.g. not
production animal focused).
Returning to work on a part time basis after taking 12 months parental
leave.
Not returning to work after taking parental leave.
Health reasons preventing ability to remain working with large animals.
24. It is notable that over the last 5 years the VBS scheme has received around 30 applicants.
However, in the 2013 round 38 eligible applications were received but 30 were selected through
a ballot process.16
Background: VBS origins, previous reviews, consultations
and amendments
25. This section addresses how and why the VBS was established and how it has changed over time
in response to previous reviews and consultations.
Early history of the VBS
26. Cabinet originally agreed that the annual amount of the incentive payment for veterinary
graduates and those in the health and education sectors would be within a band of 10 to 20
percent of the average graduate student loan. The levels of the payments were set so that the
average student loan for each profession could be repaid within five years and better
recruitment and retention outcomes could be achieved in hard-to-staff and understaffed areas.
For veterinary graduates the payment was set at $11,000/year pre-tax, estimated at $7,150/year
after tax, with data from students who last studied in 2007 used to calculate an average year 5
graduate student load of $62,900. Based on these figures the after-tax payment was 11.3
percent of the average student loan and this average loan would be repaid in the first half of
the 6th year from starting in the VBS.17
27. As requested by Ministers, MAF (MPI’s predecessor) tackled defining ’hard-to-staff’ and
‘understaffed’ and the point that someone was no longer considered a graduate and retraining
and parental leave provisions etc.18
28. MAF relied on information from the NZ Veterinary Association (NZVA), Veterinary Council of NZ
(VCNZ) and Massey University Veterinary School to implement the VBS and set its parameters.
15 See “Research Doc VBS Industry meeting 9.6.16.docx, Page 2
16 See “Research Doc Basic Facts on VBS.docx, Page 2”
17 See file “Cab paper SOC (09) 6.pdf”, 16 February 2009, Page 10 & 11
18 Source: Ibid, Page 31
www.thinkSapere.com Confidential 11Different approaches to setting graduate eligibility were explored. These included geographic
area and practice type as opposed to demonstrating hard to staff positions 19.
29. In early 2009 in the transition period MAF proposed that an "understaffed rural area" should be
defined as:
a rural area (less than 30,000 people);
where there were a low number of veterinarians to livestock units
compared to the rest of New Zealand; and
where veterinary practices had the greatest difficulty recruiting & retaining
the number of veterinarians necessary to service the livestock-based
industry needs202122.
30. It stated that this definition of "rural" excluded main urban areas which were defined by
Statistics New Zealand as large and centred on a city or main urban centre with a minimum
population of 30,000. Therefore, the scheme did not exclude satellite or independent urban
areas such as Feilding, Rangiora and Bulls.
31. Based on this definition MAF proposed that for the transition period the areas determined as
"understaffed, rural areas" be defined as:
the territorial authority of Gisborne EXCLUDING the main urban area of
Gisborne;
the territorial authority of Wairoa;
the territorial authority of Central Hawkes Bay;
the territorial authority of Tararua;
the West Coast region of the South Island covering the territorial
authorities of Buller, Grey and Westland; and
the territorial authorities of Southland and Gore.23
32. Under these transition rules if a graduate was accepted into the VBS and an understaffed, rural
area changed, the student would remain eligible24. It also noted that “Given the aim of the
scheme, MAF is also exploring the possibility of providing the opportunity for eligible graduates to
undertake animal welfare and biosecurity response training each year that they are eligible for
the scheme.”25
33. Veterinary graduates were defined as those graduates who had completed their veterinary
science qualification within 12 months of applying for the scheme 26. Leave provisions were
19 Source: file Cab paper CBC (08) 544.pdf, Page 25
20 Source: file “Briefing B08-381.pdf”, 21 January 2009, Page 3
21 Source: file “cab min SOC (09) 2-1.pdf”, Page 3
22 Source: file “Cab paper SOC (09) 6.pdf”, 16 February 2009, Page 12
23 Source: file “Briefing B08-381.pdf”, 21 January 2009, Page 7
24 Source: file “Cab paper SOC (09) 6.pdf”, 16 February 2009, Page 26 (electronic page numbering)
25 Source: “Briefing B08-381.pdf”, 21 January 2009, Page 8
26Except in the transition year when graduates since 2005 would be eligible if they were working in an
understaffed, rural area at the time that the scheme was introduced.
12 Confidential www.thinkSapere.comREVIEW OF VOLUNTARY BONDING SCHEME FOR VETERINARIANS
defined as a minimum of 14 weeks of parental or retraining leave (consistent with wider paid
parental leave regulations). Also, absences of up to 14 weeks in a 12 month period would not
affect the time period a graduate needed to complete to receive the incentive payments. If the
graduate still held an employment agreement, any additional absence over 12 weeks would be
a pause in completing scheme requirements.27
2013 VBS review
34. The scheme was last reviewed in 2013. The review found that anecdotal evidence provided by
the NZVA and Veterinary Council that specific regions were understaffed was not supported by
data from the Veterinary Council’s workforce survey. This review caused changes to the terms
and conditions which had been requested by the NZVA and VCNZ. These included the process
for applicants who missed out on a place in the scheme. 28
NZVA views December 2015
35. The same views that the VBS may not be addressing the needs of some of the more remote
areas of New Zealand were expressed in 2015 by the NZVA 29. However, data again did not
appear to suggest that there was an obvious imbalance in the location of participants in the
scheme, between those who had worked at practices in New Zealand’s more remote regions,
and those closer to major centres.30
Issues raised in 2016
36. After about 5 years the NZVA wanted MPI to review the VBS. It argued that the scheme should
prioritise applicants who worked in practices in regions that were ‘hard to staff’. Some of the
Association’s members had expressed concerns that applicants who were based close to major
centres were receiving places at the expense of applicants working in more remote areas. At
the time MPI didn’t support a review on the basis that there wasn’t much evidence of such an
effect and that the number of applicants had only marginally exceeded the number of annual
vacancies in each of the preceding three years31.
Industry discussions in 2016
Balloting system
37. In 2016, industry discussions debated the balloting system. Under the VBS if there are 30
eligible applicants, they each receive $55,000 (before tax) over the 5 year period. If there are
less than 30, they still each receive $55,000. If there are more than 30 applicants, a random
27 Source: “file “Cab paper SOC (09) 6.pdf”, 16 February 2009, Page 13 (electronic page numbering)
28 See file “Research Doc B15-323_Meeting with NZ Veterinary Association.docx”, Page 10
29 The NZVA was established in 1923 and has a membership of 2,000 New Zealand veterinarians. It aims to
promote excellence in the veterinary profession.
30 Source: “Research Doc B15-323_Meeting with NZ Veterinary Association.docx”, Page 5
31 Source: “Research Doc Basic Facts on VBS.docx”, Last printed 25 November 2015, Page 1
www.thinkSapere.com Confidential 13ballot is held, and the first 30 names picked are accepted into the scheme. 32 A suggestion was
made at the meeting that if there were less than 30 applicants, the fund could be divided evenly
between those who applied, and each would receive a higher grant; and conversely if there
were more than 30 applicants, the fund would once again be divided evenly between them, but
each would receive a smaller grant. A subsequent poll of Massey students showed more
support for the funding amount to remain the same ($55,000) rather than to have the amount
received diluted but with a more robust assessment process and this was supported by NZVA
and VCNZ.
38. It was thought that a randomised ballot was not the most effective way to choose participants
in rounds where there were more than 30 eligible applicants. This method led to some remote
practices missing out, even though they possibly had more difficulty recruiting new staff.
Although since 2014 there had been exactly or close to 30 eligible applications. It was thought
that when job market improved, or if the timing of the fund round changed, this issue was likely
to become more problematic again. 33
Timing of VBS application rounds
39. Another area of discussion was the timing of the VBS application round which was in February
each year. It was suggested that a large proportion of potentially eligible students were not
able to secure jobs by then. Discussion was held about whether changing the timing of the
funding round would be more appropriate. 34
Total income vs professional fees
40. Discussions in 2016 also covered the fact that some practices clearly had a production animal
focus even though they would not meet the criteria of 60 percent of professional fees being
generated through servicing production animals. It was pointed out that some practices had a
reasonably large proportion of their professional fees generated through small animals, but
most of their total turnover came from production animal servicing. It was suggested that the
criteria be changed to include practices which generated a minimum of 60 percent of total
turnover through the servicing of production animals. It was thought that this might be more
equitable.35 This was confirmed by a subsequent poll of the NZVA which supported this
approach36
Consultations and changes in 2017
41. After consultations with the sector in 2016 a number of changes were made to the VBS in 2017.
At that time industry representatives had said that they preferred a prioritisation process so
32 Source “Research Doc VBS Industry meeting 9.6.16.docx”, Page 3. Other options are discussed here.
33 Ibid, Page 3
34 See “Research Doc VBS Industry meeting 9.6.16.docx”, Page 4
35 See “Research Doc VBS Industry meeting 9.6.16.docx”, Page 4
36 See “Research Doc Memo to Director regarding 2017 VBS changes.doc”, Page 2
14 Confidential www.thinkSapere.comREVIEW OF VOLUNTARY BONDING SCHEME FOR VETERINARIANS
graduates would be more likely to be accepted in the most hard-to-staff areas relative to those
areas that were more attractive to graduates37. Another option giving higher levels of funding
to applicants from prioritised areas, and less funding to applicants from low priority areas was
also discussed. It was agreed that this would be more difficult to manage as people within each
cohort would be receiving different amounts of funding.38
42. In January 2017 following feedback from the sector, MPI Investment Programmes proposed
changing the timing of the VBS funding round from February 2017 to 14-25 August. This
timing reflected feedback from graduates and was more in line with when most graduates had
employment confirmed. It had no impact on other funding rounds within investment
programmes.39 At the same time, MPI proposed amending the target of 60 percent of
professional fees for practices focused on production animals to 60 percent of total turnover.
This reflected the 2016 feedback from the industry and was designed to allow some practices
that might have otherwise been very close to the criteria to be eligible. 40
Farm dogs
43. Feedback from the sector also questioned whether farm dogs were defined as small animals
versus contributing to production animal work on farms. It was commented that several more
remote practices serviced a lot of small animals, but the majority of these were working farm
dogs which were critical for production animal farming.41 As a consequence MPI Investment
Programmes proposed including farm/working dogs as eligible work for VBS graduates and
practices. The following definition of a working dog was developed in consultation with NZVA
and VCNZ:
“Working dog (also known as ‘herding’ or ‘stock dog’) means a dog for which the primary purpose
is to work on the farm to assist in shifting or herding livestock. This excludes dogs that live on
farm but are primarily kept as pets.”42
Key Issues raised by 2019 Survey of VBS recipients
44. MPI carried out an on-line survey to check on whether the VBS was meeting its purpose in early
2019. The survey was sent to 284 recipients on 8 February 2019 and one further recipient on 27
February. 142 surveys were started and 134 completed – a 47 percent completed response rate.
The last question sought general feedback on the VBS. 88 VBS recipients responded – 31
percent.
45. Respondents were overall very positive about the VBS. Two problem areas stood out above
others for VBS recipients:
37 Source: “Research Doc Memo to Director regarding 2017 VBS changes.doc”, Page 2
38 Source: “Research Doc Memo to Director regarding 2017 VBS changes.doc”, 26 January 2017, Page 1
39 Source: “Research Doc Memo to Director regarding 2017 VBS changes.doc”, Page 2
40 Ibid, Page 2
41 Ibid, Page 2
42 Source: “Research Doc Memo to Director regarding 2017 VBS changes.doc”, Page 2
www.thinkSapere.com Confidential 15 Tax : 22 VBS recipients commented that the grant should not be taxed,
and if so not as a secondary tax.
VBS targeting: 15 VBS recipients felt that if the scheme is over-subscribed
the truly isolated rural areas should be ranked and funded first rather than
the ballot system which treats every application as equal. Areas like the
South Island, West Coast and Southland, and North Island East Coast,
Northland and Taihape were cited as rural, with grads requiring incentives
to stay. Hamilton, Taupo and Auckland were cited as not rural. It was
thought that preference should be given to more rural positions.
46. The early history and earlier reviews, consultations and amendments provide the background
against which this review is taking place. In the following sections each question from the
terms of reference is addressed in turn.
Question One: Is the objective of addressing rural
veterinary shortages still relevant and appropriate?
47. Question one addresses whether the objective of addressing rural veterinary shortages still
relevant and appropriate and was accompanied by five subsidiary questions as follows:
Which indicators, if any, signal that there is a shortage of rural
veterinarians?
What are the potential consequences of any such shortage?
Is any such shortage uniform around rural New Zealand, or is it
concentrated in particular practice types, geographies or regions, farm
systems, etc.?
Have any such indicators changed since the introduction of the scheme?
Is the goal of addressing staff shortages still aligned with the Government’s
policy objectives, MPI’s strategy, and the interests of Aotearoa New Zealand?
48. The relevant papers from the VBS’s establishment in 2008/09 do not provide a statistical basis
to allow monitoring over time of any shortage of rural veterinarians. Discussions with Statistics
NZ indicates that there is a lack of statistics on veterinarians. The 2018 census relates that there
were 2,475 veterinarians and 2,145 veterinary nurses counted in the section on occupation. 43
This level of granularity cannot assist in investigating whether there is a shortage of rural
veterinarians. Given this, the best source of alternative data is that collected by the VCNZ in its
annual “Workforce Reports” with the latest being for 2017/18.44 These summarise the results of
the VCNZ’s workforce surveys. This data is collected from questionnaires sent to veterinarians
at the time they apply for their Annual Practising Certificates (APCs) and completed by them
voluntarily.
43 Covers the employed usually resident population count aged 15 years and over.
44 For example see http://www.vetcouncil.org.nz/pubs.php
16 Confidential www.thinkSapere.comREVIEW OF VOLUNTARY BONDING SCHEME FOR VETERINARIANS
49. Two recent analyses by MPI45 have explored whether the data in the VCNZ workforce reports
could throw any light on the question of whether there was a shortage of rural vets. The first of
these analyses focused on the potential to measure variables such as:
The percentage of graduate vets completing the VBS requirements
compared to total concurrent vet FTEs
FTEs in qualifying practices
FTEs in defined regions
Value of stock saved
50. This first paper viewed the following data as being of relevance to the performance of the VBS:
Animal Practice Certificates (APCs) issued per financial year for the 73
territorial land authorities (TLAs).
Livestock units (LSUs)46 per financial year for the TLAs.
Retention rates for NZ graduates (measured by number of graduates
taking out APCs each year after their graduation) note that only 2002 to
2011 data was available.
51. This analysis concluded that to answer questions about the performance of the VBS it would be
ideal to measure demand (vet hours required) and supply (vet hours available) at the TLA level.
But it noted that the Vet Council’s data was not detailed enough to do that. This paper did
observe that since 2009, when the VBS commenced, livestock numbers had declined while vet
numbers had increased (measured as FTE’s x average weekly hours). It commented that the
downward trend in LSUs was driven by the decline in sheep numbers. It also noted that there
had been a steady increase in the number of veterinarians working less than 40 hours per week
(mainly to carry out family care).
52. Importantly, this MPI analysis found that the retention rate of VBS grads in the veterinary
profession was greater than that for all Massey grads for the first 3 years of work but there was
no significant difference by the fifth year. This comparison covered the period between 2002
and 2011. Finally, the paper averred that the VBS’s attraction objective was probably
superfluous as graduates were already committed to the rural practice.
53. The second MPI VBS ‘Options” paper concluded that “ultimately, none of the [measurement]
options offer a straightforward and reliable way to measure the impact of the scheme in the long-
run and none are likely to be found. However, there are methods that improve on [the] status
quo.” The methods that it proposed that might improve on the status quo were the same
metrics bulleted in paragraph 49 above.
45 “Analysis of VBS performance based on Vet Council data” file name “VBS performance v3 (1)” and “Possibilities
for measuring VBS performance” file name “VBS Option”. Both appear to have relied on work by Matt
MacFarlane. Both documents are not dated but were probably written in late 2018 or early 2019.
46 LSU was defined as having an annual feed requirement of a "standard" 55 kg breeding ewe rearing a single
lamb of 520 kg of good quality pasture dry matter per year. Beef and dairy cattle are between 4 to 8 LSUs per
animal while sheep range from 0.7 to 1.3 LSUs.
www.thinkSapere.com Confidential 1754. This review agrees that the available metrics are not straightforward or reliable for assessing the
impact of the VBS on any shortage of rural vets. Trends in LSUs compared to vet workforce
numbers and hours are too removed from a direct measure of any shortage of vets working on
production animals. The LSUs are an average that obscures this sort of detail. For example, the
gulf between the relatively low demand for vets on sheep and beef farms, compared to high
demand for vets on dairy farms is not visible, but servicing dairy farms is a major demand
pressure on many production animal focused practices. Vets with mixed time allocation
between production animals and other animals is also likely to complicate the data. As the
analysis attempts to focus in on only rural areas by, for example, excluding TLAs based solely in
cities, the amount of data on which to attempt to do statistical analysis falls and the risks of
anomalies in the data rises.
55. The MPI analysis also utilised VCNZ retention data that tracks vets keeping their annual APCs
current. Figure 2 below repeats a chart from the VCNZ’s Workforce Report 2017–18 which
maps the proportion of New Zealand veterinary graduates taking out an Animal Practice
Certificate with the VCNZ one to 10 years following their first year of registration between 2003
and 2014. This covers all vets. The impact of the VBS on this data set is therefore likely to be
significantly diluted. However, it does appear to show some level of improved retention of vets
overall since 2009. Retention of vets taking out their APCs who started doing so in 2010
onwards appear to have higher retention rates than those before the VBS was put in place in
2009.
Figure 2 : Retention of NZ Vets in the veterinary profession.
Source : Veterinary Council of New Zealand Report “Workforce Report 2017–18”, Page 20.
56. However, a variety of other factors may have influenced this result including the impact of the
Global Financial Crisis (GFC) in 2008. In interviews a number of vets commented that the GFC
meant less opportunity for young vets to work overseas for a few years after 2008. This would
have improved the number staying in New Zealand. So Figure 2 can only suggest that the VBS
18 Confidential www.thinkSapere.comREVIEW OF VOLUNTARY BONDING SCHEME FOR VETERINARIANS
may have had a positive impact but it is not possible to separate out other influences in the
data.
57. For these reasons this review also concurs that it does not appear that suitable metrics are likely
to be found given the limited granularity of Statistics NZ on vets. Because of this, it is not
possible to address the subsidiary questions about the potential consequences, nature, location
or trends in any shortage of vets by using analysis of statistics. This leaves interviews and
surveys as the best option for exploring this question. The interviews and a survey of eligible
vet practices did provide some backing that the VBS has had a positive impact and has changed
retention in eligible practices, in particular.
58. The following are typical quotes from the interviews:
“It’s an important part of the package that attracts and
retains”47
“It may not be the deciding factor but if it wasn’t available
it would make a difference.”48
“Without the VBS we’d be in the dog box.” 49
“Graduate vets ask you if you’re rural bonded. It’s very
important to them”.50
VBS has certainly made rural practice a much more
attractive option.51
59. The final subsidiary question asks “Is the goal of addressing staff shortages still aligned with the
Government’s policy objectives, MPI’s strategy, and the interests of Aotearoa New Zealand?” We
explore the degree to which the VBS is aligned with these goals as we address the costs and
benefits of the scheme and potential changes in upcoming sections of this report.
Question Two: Is this objective being met effectively by the
current scheme?
60. Question two addressed whether the objective of the VBS was being met effectively by the
current scheme. It was accompanied by six subsidiary questions as follows:
If any, which improvements in shortage indicators can be attributed to the
scheme? To what extent?
Are there any unintended/spill-over consequences (including beneficial
ones) from the scheme that can be identified?
47 Taranaki rural vet practice interview
48 Ibid
49 South Island rural vet practice interview
50 Ibid
51 South Island Veterinary Director
www.thinkSapere.com Confidential 19 Is the scheme effectively incentivising veterinarians who would otherwise
practice in ineligible practices to practice in eligible ones, and to what
extent do these veterinarians continue to practice in rural practices
during their careers (based on available data to date)?
Are there any notable factors external to the scheme that have
contributed to or hindered the achievement of the scheme’s purpose?
Are any such improvements uniform across rural Aotearoa New Zealand, or
do they accrue to particular practice types, geographies, regions, farm
systems, etc.?
Are any such improvements likely to continue in the medium and long run
under the status quo?
61. Lack of pertinent data for analysis of any shortage in rural veterinarians makes addressing the
main question, and subsidiary questions on this theme, challenging. However, the other
subsidiary questions covering unintended/spill-over consequences, the VBS incentivising vets to
go to and stay at eligible practices, and the impact of external factors, are more open to being
addressed. We tackle these in the next section which addresses the net economic benefits of
the VBS. We also attend to the question of the extent to which the VBS helps to attract and
retain graduate vets in the section headed “Question Four: What changes could be made to the
scheme?” subheading “Continued justification for the VBS”.
Question Three: Is the scheme meeting this objective in a
financially responsible and accountable way?
62. This section investigates the net economic benefits of the VBS and subsidiary questions. The
subsidiary questions were as follows:
How can the net economic benefits of the scheme be meaningfully
measured?
By these measures, what are the net economic benefits of the scheme?
To whom are the economic benefits of the scheme accruing?
In particular, has the scheme been subsidising the Veterinary practices’
labour costs?
Has the scheme been subsidising the income of individuals who would
have pursued practicing veterinary medicine on production animals in an
eligible rural practice even in the absence of the scheme?
How are the benefits distributed between practice owners, participating
veterinarians, farmers and rural communities, and wider society?
Are any such economic benefits likely to continue in the medium and
long run under the status quo?
63. Firstly, we set out the costs of the VBS and we then examine the economics of the VBS as a
subsidy using a standard economic model. This suggests possible answers to the subsidiary
questions under questions 2 and 3 about who is benefiting from the VBS.
20 Confidential www.thinkSapere.comREVIEW OF VOLUNTARY BONDING SCHEME FOR VETERINARIANS
Economics of the VBS as a subsidy
64. Subsidies are money given directly to people or entities by governments to encourage
production and consumption of goods and services. They are designed to encourage economic
transactions that would not have otherwise occurred. This is the case for the VBS as it was
designed to provide more graduate vets to understaffed vet practices focused on servicing
production animals than were previously available. This was due to the Government’s view that
veterinary practices in rural areas were understaffed and suffered from recruitment and
retention difficulties. This was most acute in remote and smaller practices 52. Cabinet papers
and other relevant documents from VBS establishment in 2008/09 show that it was the
Government’s assessment that prior to the VBS, the market was not providing enough
veterinary services, provided by graduate vets, in these areas.
65. Because the VBS incentive is paid directly to graduate vets to work in vet practices with a
primary focus on production animals, it acts as an indirect wage subsidy that aims to affect the
labour market for graduate vets in such vet practices. To be effective, the VBS should have
changed the willingness of graduate vets to sell their labour to these production animal focused
practices. These practices should, as a result of the VBS, have less gaps in their staff line up
than they otherwise would have had.
66. Figure 3 below helps to explore how the VBS subsidy is likely to have affected the market for
graduate vets.
Figure 3 : Economics of VBS (partial equilibrium approach)
Supply of Supply of
Remuneration of grad vets in production
grad vets grad vets
without VBS with VBS
animal focused vet practices
Demand for
grad vets
Quantity of grad vets to production animal
focused vet practices
52 See section “Objective of the VBS”
www.thinkSapere.com Confidential 2167. Figure 3 shows the standard supply and demand model adapted for graduate vets in
production animal focused practices. In this example, applying the VBS increases the supply of
graduate vets to these practices compared to the situation before the policy was introduced.
VBS graduates receive $11,000 per year over 5 years 53 if they stay working for production
animal focused practices. Graduates not working in such practices do not receive this funding.
This is likely to lower supply of graduates to urban companion animal vet clinics by some
marginal amount. However, there are other sources of graduate vets, particularly from offshore.
68. To provide some context, the current recommended starting wage for a graduate vet is $60,000
per year.54 So the $11,000 per year represents circa 18 per cent of the base starting rate. Based
on interviews of a range of eligible practices, starting employment packages for graduate vets
can also include other components of value such as access to housing and vehicles, training
and payment of professional fees. So, in pure monetary terms the VBS is likely to make up
something less than 18 per cent of annual first year graduate vet income.
69. This approach also provides a way of thinking about who may have gained and lost from the
VBS as shown in Figure 4.
Figure 4 : Economics of VBS allocation of benefits
Supply of Supply of
Remuneration of grad vets in production
grad vets grad vets
without VBS with VBS
animal focused vet practices
Benefit to Vet Practices
P $11,000/year
Benefit to Vet Grads
P
VBS
Demand for
grad vets
Q QVBS
Quantity of grad vets to production animal
focused vet practices
70. Figure 4 takes the averaged and generalised supply and demand model a step further. The
increase in the number of graduate vets working in eligible practices is represented by the
quantity increases from Q to QVBS. This suggests that there would be more staff in these
practices, than there otherwise would have been. These extra staff can be used to service the
53Paid in instalments of $33,000 after 3 years, a further $11,000 after 4 years and a final $11,000 after 5 years.
54Based on the March 2019 Salary Scale Review following negotiations between the Association of Rural
Veterinary Practices and Club Practitioners Branch of the New Zealand Veterinary Associate (NZVA).
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